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Social media and price discovery: the case of cross-listed firms

Rui Fan Orcid Logo, Oleksandr Talavera, Vu Tran

Journal of Financial Research

Swansea University Author: Rui Fan Orcid Logo

Abstract

This paper examines whether social media information affects the price discovery process forcross-listed companies. Using over 29 million overnight tweets mentioning cross-listedcompanies, we investigate the role of social media for the linkage between the last periods oftrading in the US markets an...

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Published in: Journal of Financial Research
Published:
URI: https://cronfa.swan.ac.uk/Record/cronfa59701
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Abstract: This paper examines whether social media information affects the price discovery process forcross-listed companies. Using over 29 million overnight tweets mentioning cross-listedcompanies, we investigate the role of social media for the linkage between the last periods oftrading in the US markets and the first periods in the UK market. Our estimates suggest thatthe size and content of information flows in social networks support the price discoveryprocess. The interactions between lagged US stock features and overnight tweets significantlyaffect stock returns and volatility of cross-listed stocks when the UK market opens. Theseeffects weaken and disappear after one to three hours after the UK market opening. We alsodevelop a profitable trading strategy based on overnight social media, and the profits remaineconomically significant after considering transaction costs.
Item Description: Preprint before peer-review available via https://ideas.repec.org/p/bir/birmec/20-05.html
College: School of Management